Cyprus International Trusts

PREFACE

Cyprus International Trusts are widely used for a variety of purposes. We set out below the various uses of trust, the key characteristics of Cyprus International Trusts and the tax treatment of trusts in Cyprus.

WHAT IS A TRUST

A trust is an arrangement, a legal agreement, whereby a person (the trustee) holds and deals with property (trust property) as its nominal owner for the benefit of persons (the beneficiaries). In simple terms, a trust is created when a settlor transfers ownership of certain assets to a trustee and the trustee then manages them for the benefit of the beneficiary/ies in accordance with the wishes of the settlor.

USES OF A TRUST

There are various reasons for establishing a trust. It could be for charitable or personal reasons as well as for commercial and business purposes. For example, a trust may be created:

For estate planning purposes e.g. for one to arrange the management and disposal of his/her estate after death and to name specific beneficiaries for which the trustee will provide benefits

For asset protection purposes e.g. the trust property becomes property of the trustee and is no longer in the possession of the settlor who may operate in a litigious employment

To holding property for which the settlor does not wish to hold ownership ▪ For tax planning purposes, e.g. elimination of inheritance tax, capital gains tax, transfer fees and other

  • For confidentiality reasons e.g. a person may not want his/her name to appear as owner of an asset
  • To protect property against spendthrift people
  • To enable charitable objects to be carried out
  • To hold property for minors or successive generations of a family
  • To provide pensions for employees and dependents
  • To provide an incentive to the workforce: e.g. via employee trusts of various kinds
  • To provide secretly for others
  • As the top holding investment vehicle for a group of companies
  • As part of commercial arrangements to protect certain interests
  • To establish a fund for the benefit of family members according to future needs as and when they arise
  • To make provision for abstract purposes which are not charitable through a purpose trust